DEALBOOK; Kenneth Cole Wants to Take His Apparel Company Private

By KEVIN ROOSE

Published: February 25, 2012

Kenneth Cole, the fashion designer who sells shoes, bags and apparel, is seeking a private label for his own company.

Mr. Cole, who is the company's largest shareholder, with 47 percent of the common stock, has offered to take his company private for $15 a share.

He said that the pressures of the public markets had caused the company to focus on short-term earnings at the expense of long-term innovation.

''Recent market challenges have created a sharply competitive landscape, and I believe it is now more important than ever to embrace a more entrepreneurial perspective,'' Mr. Cole wrote in a letter to the company's board on Friday.

''I am convinced that private ownership is in the best interests of the business and the organization and that this proposal is in the best interests of the shareholders.''

In response, the company's board formed a special committee to evaluate Mr. Cole's bid as well as any other potential offers. The committee includes all of the board members except Mr. Cole and his chief executive, Paul Blum.

The proposal for Kenneth Cole Productions pegs the company's value at around $280 million, and represents a 26 percent premium over the 45-day average closing price of the stock as of Thursday. The shares rose 18.5 percent, or $2.42, to $15.49 on Friday - an indication that some investors believe that the designer may have to raise his bid.

Still, over the last five years, its shares have fallen sharply, as a recession dried up sales at all but the most resilient luxury brands. Kenneth Cole specializes in midmarket fashion accessories like a Meet U There loafer that retails for $148 or a women's spot print dress for $149.50.

Mr. Cole, who got his start selling designer shoes out of a trailer parked on the streets of Manhattan, has also fallen behind rival celebrity designers like Michael Kors, whose company went public in December. Its shares have since gained roughly 70 percent.

''Being public is great when the stock is working. It's not so great when it's not,'' said Faye Landes, a managing director at Consumer Edge Research.

In the letter announcing his plan to take the company private, Mr. Cole said he was committed to keeping the company's management in place, as well as its employee base of roughly 1,800, which ''he views as one of its most important assets,'' the release said.

If the buyout is successful, Kenneth Cole Productions will be private for the first time since its 1994 initial public offering. It will also be among the best-known private fashion labels. J. Crew, another retailer, was taken private in a $3 billion buyout by two private equity firms last year with the support of its chief executive, Millard S. Drexler.

''It's right out of the textbook,'' Howard Davidowitz, the chairman of Davidowitz & Associates Inc., a national retail consulting firm, said of Mr. Cole's buyout attempt. ''He's saying, '70 percent of what I've got is a jewel. It needs a little cleaning up, so I'm going to do it in private.' ''

Mr. Cole, the chairman and chief creative officer, said in the letter to the board that he did not intend to sell his stake in the company once taken private, nor would he support an outside acquisition or merger.

The buyout attempt could stall if shareholders deem it too low, or if an outside bidder emerges. ''Any of these deals is a negotiation,'' Mr. Davidowitz said. ''You make an offer, and that offer is the basis for discussion.''

But if his bid finds a sweet spot, Mr. Cole, 57, who is married to the sister of the governor of New York, Andrew Cuomo, will have the freedom to retool his brand without the pressure of appeasing public shareholders.

''He has access to capital, he has his name, he's well connected,'' Ms. Landes said. ''Now, he can do what he really wants to do with the business.''

This is a more complete version of the story than the one that appeared in print.

PHOTOS: Kenneth Cole, who started his fashion company by selling designer shoes out of a trailer in Manhattan, has offered to take the firm private for $15 a share, or about $280 million. (PHOTOGRAPHS BY MIKE COPPOLA/GETTY IMAGES; JIM SPELLMAN/GETTY IMAGES FOR KENNETH COLE)